Federal Tax Credit for Geothermal Heat Pumps
The 30% federal tax credit for geothermal heat pump installations was extended through 2032 and applies retroactively to systems installed on or after January 1, 2022. This credit decreases to 26% in 2033 and 22% in 2034 before expiring entirely. Act now to maximize your savings!
Key Details
- 2022–2032: 30% of the total system cost
- 2033: 26% of the total system cost
- 2034: 22% of the total system cost
- Eligibility: Geothermal equipment must meet ENERGY STAR standards and use stored solar energy for heating and cooling. Covered costs include labor, installation, and system connections.
- Additional Benefits:
- No limit on credit amount
- Offset for regular and Alternative Minimum Tax (AMT)
- Can be carried forward to future tax years
- Can be combined with solar, wind, and energy efficiency credits
What’s Not Eligible
- Equipment used solely for hot tubs or pools
- Previously used equipment
- Rental home installations
Claiming the Credit
Use IRS Form 5695 to claim the Residential Energy Efficient Property Credit. If the credit exceeds your tax liability, the remaining amount can be carried forward to future years. Spending on geothermal systems also adds to your home’s cost basis but must be reduced by the tax credit received.
Note: Consult a tax professional for specific guidance, as this document is for informational purposes only.